If it’s high, Now is a Good Time to Borrow

In this crazy lending market, interest rates have remained at historic lows but all the banks have gotten so picky that most requests for loans go unanswered.  There is an old saying that goes, “If you don’t need the money, you can borrow all you want”.

Well, a year after the global freeze in the credit markets that caused massive government intervention (aka interference) interest rates continue to remain at historic lows.

That’s great for people with good credit.  If not, it seems like you could be wasting your time.  Credit has gotten to be so tight that if you are willing to be interrogated for several days, and can document your entire life story, (video and pictures help) along with signed letters from every institution that you have done business with, you might be considered for a loan.  And from all we can see, it’s going to be around for a while.

Bank and financial institutions are on the defensive posturing stage.  After many completely blew lending on the mortgage side, it has had a ripple effect in all other areas of lending from home purchase, to auto, to personal loans, and any other mode of credit issuance that was common in the past.  Not now.  No segment of borrowers has been spared. During the housing boom five years ago, 7 of 10 applications were approved.  Today is 5 in 10.  With credit card companies getting tighter with credit, consumer credit carddebt declined by $6.1 billion in July.

For perspective, big banks are not risk averse.  That’s common sense, right?  Rather, their reluctance to lend has to reflect the fact that they must conserve cash to absorb billions in losses that are still expected to occur from bad loans that were made before our financial meltdown last September of 08. FDIC-insured banks lost a total of $3.7 billion in the second quarter, dragged down by growing number of bad loans.  They set aside nearly $67 billion in the second quarter in anticipation of future losses from all those wonderful decisions that they made for years leading up to the crash.

Oh, there are a lot of other reasons, such as the lack of ability to pool loans into securities, (ABS = auto back securities) for sale to investors, or securitization. Lehman brothers collapse pretty much dried up this market outlet but there are signs of opportunity that crop up from time to time.  With consumers ratcheting back their borrowing and banks getting tougher with their lending criteria, rates will remain low for those who have good credit.  If you can stand the pain, you will benefit from the gain.

What has been your experience?  We would love to hear what you are seeing from your point of view.

Here’s to getting this economy back on track.

“American consumers and workers were the clear winners thanks to Cash for Clunkers program,” said Ray LaHood, U.S. transportation secretary. “Manufacturing plants have added shifts and recalled workers. Moribund (or bare) showrooms were brought back to life and consumers bought fuel-efficient cars that will save them money and improve the environment.”

Overall, rebate applications worth $2.877 billion were submitted by the Tuesday deadline. This covered 690,114 applications.
 
Top 10 Most Purchased Autos
Of the top 10 most purchased vehicles under the Cash for Clunkers program, only five automakers made the cut. This includes Toyota, Honda, Ford, Hyundai and Nissan. Toyota and Honda each had three models make the most purchased list, while Ford was close behind with two. Nissan and Hyundai meanwhile each had one model making the most popular Cash for Clunkers purchases.

Top Most Traded In Autos
The Ford Explorer 4WD and the Ford F-150 Pickup 2WD were the significant leaders in what was traded in.  Of the vehicles traded-in, 84 percent were trucks with 59 percent of customers purchasing passenger cars. The average trade-in mileage was 15.8 mpg, which leads to an overall increase of 9.2 mpg, or 58 percent climb, as the average new vehicle purchased receives 24.9 mpg.
 
Offering preliminary insight into the impact of the Clunkers program will have on the economy, the White House Council of Economic Advisers predicted the program will ramp up economic growth in the third quarter by about 0.3 to 0.4 percent at an annual rate due to the sales. The gross domestic product will be sustained thanks to increased vehicle production and to fulfill inventory requirements, the group indicated. Furthermore, an excepted 42,000 jobs will be created or saved.

New-Vehicle Manufacturer Percentages:
Toyota: 19.4 percent
General Motors: 17.6 percent
Ford: 14.4 percent
Honda: 13 percent
Nissan: 8.7 percent
Hyundai: 7.2 percent
Chrysler: 6.6 percent

There is, as we’ve mentioned many times, a large gap in opinions of just how successful the program was.  However, what it did do is create an artificial spike in consumer spending.  If you think about it, the conclusion that was most promoted by the non-objective major newscasters who thought of this as a good idea, was to proclaim its success. 

With the direct lending markets still in mourning from the failed practices of many banks mortgage fiasco, a huge market still exists for auto loans and refinancing for everyone who does not have a 720+ FICO score.  In the meantime, and still a “nightmare” is the fact that dealerships are still waiting for their money, and most have stopped junking the trade-ins in fear of Uncle Sam failing to reimburse them under the program.  Time will tell.  What do you think?  Good or bad, let us know.

The study examined five key factors to contribute to satisfaction within the prime retail credit, subprime retail credit and retail leasing segments: provider offerings, credit personnel, application/approval process, termination policy/service and sales representative relationship. Three factors were measured in the floor-planning segment: provider offering; floor-plan support personnel and process/service.

The study was based on responses from more than 2,000 dealer principals who were surveyed between April and May of this year.  

On a 1,000-point scale J.D. Power found:

Prime Retail Credit (down 46 points)
2008: 835
2009: 789

Subprime Retail Credit (down 76 points)
2008: 793
2009: 717

Retail Leasing  (down 79 points)

Floor Planning  (down 90 points)

The retail financing experience account for more than two-thirds of dealer satisfaction. Meanwhile, offerings such as rates account for less than one-third of overall satisfaction.  While recognizing that the past year has been tough for dealers, J.D. Power executives advised, “This indicates an opportunity for lenders to differentiate themselves through service, even though external market forces are driving a more conservative lending approach.”   I just love the “more conservative lending approach,” don’t you?

David Lo, director of financial services as J.D. Power, explained it this way, “Current economic conditions have created something of a ‘perfect storm’ as declines in new-vehicle sales, tightened lending and reduced inventory funds have combined to put extreme stress on dealer business.”

“However, the fundamental principles of service are unchanged. Lenders that focus on prompt application and funding turnaround times, have credit buyers that demonstrate willingness to worth with their clients and have sales representatives who are skilled in relationship management may position themselves to be a lender of choice,” he continued.   This is actually pretty significant.  One of these days lenders will clamor around the dealerships, if not the buying consumers, and be happy to lend money again.  LOL, that sure sounds so funny to me.

This is interesting as well; Basically, the study discovered that higher levels of satisfaction may positively impact the amount of a business a lender receives from a dealer.  For instance, for the lenders in the prime retail segment whose satisfaction scores averaged 712 on a 1,000-point scale, 22 percent of dealers say they “definitely will” increase their business with this organization.

However, of the lenders whose satisfaction scores averaged 886, 46 percent of dealers said they “definitely will” increase business with that lender.  Lo noted, “High-performing lenders tend to close a higher proportion of deals. This is critical right now, and almost more importantly, may serve as a foundation for growth one the market stabilizes.”

Prime Retail Credit

Taking the top spot in the prime retail credit segment was Mercedes-Benz Financial with an index score of 918. Officials said this company performed particularly well in two areas, provider offerings and credit personnel.  The prime retail credit company averages of a few sample lenders are as follows:

Mercedes-Benz Financial: 918
BMW Financial Services: 898
Toyota Financial Services: 873
Audi Financial Services: 838
Honda Financial Services: 831
Wachovia Dealer Services: 814
Ford Credit: 802
Bank of America: 787
Chase Auto Finance: 772
US Bank: 744
Capital One Auto Finance: 732
GMAC: 711
Chrysler Financial: 665

Subprime Retail Credit

Interestingly enough, J.D. Power said that no awards were presented in the subprime retail credit segment due to insufficient market representation.  

The rest of the detail is not that interesting so I won’t go into it.  I don’t know about you but let’s hope that this ‘Perfect Storm’ ends soon.  I’d like to see the supply of financing start to meet the demand of the applicants.  No doubt it will take time but I speak for myself when I say I’m getting a little impatient!

The government of the United States is offering $3,500 and $4,500 vouchers for vehicles traded in toward the purchase of a new car.
Here is a quick overview of the Cash for Clunkers program.
1) Visit the www.CARS.gov for current information about the program.
2) Determine if you qualify for the program and locate a dealer.
3) When you purchase or lease a new vehicle the dealer handles the submission to the NHTSA.
4) NHTSA ensures that your purchase meets all of the requirements.
5) About 10 days later the NHTSA credits the dealer if all requirements were met.

There are several restrictions to the program and it doesn’t last forever.
• New car purchases only (no used vehicles allowed)
• Car must be purchased between July 1, 2009 and November 1, 2009
• No cars older than 25 years
• You must be able to drive your car to the dealership for trade in
For a complete list of restrictions visit www.cashforclunkerfacts.com

Don’t wait. This is a first come first serve program. The funds to the program are limited and it will end before November 1, 2009 once the funds are gone.

Apply at myAutoloan.com to finance your new car purchase.

Online auto financing has become easier to obtain as well as seeking and obtaining helpful information on what your auto financing options can be. The process is fast, convenient and absolutely safe. (Did I say it was Free too?) myAutoloan.com requests and requires you to fill in a single page application form. You will have to give some financial and personal details. These are required for us to understand and match your requirements and repayment ability to our network of lending partners. All the details provided at myAutoloan.com are stored on a secured server and stern steps taken to preserve your confidentiality. Apply for a new auto loan, an auto refinance loan or a used car loan, at myAutoloan.com from either your home or office.

Apply Now
Auto financing through myAutoloan.com is a really user friendly and a cheap way of getting funds for your automobile. Many people apply for dealership financing. However, dealership financing is expensive as they mark up all interest rates. At myAutoloan.com you will get auto financing at low interest rates based upon your credit score. Also the repayment plans from our lender network are flexible with monthly repayments in keeping with your monthly budget. Auto financing is usually for a term ranging from 3-5 years. Auto financing for all manufacturers of automobiles is provided. Go on, give us a try. Check us out first and then bookmark us so that you can consider us next time you need a replacement auto or want to trade up, get your auto loan direct and save a ton of money. Follow us on: Twitter & Facebook

“As we have discussed before, there are a lot of auto buyers that pay more than they have to pay because they need a car,” says Heather Dietel, Director of Business Development at myAutoloan.com, a licensed auto loan refinancing lender. “If they just had to have transportation and purchased a car with higher rates at the time, they will absolutely be surprised at how much they can save.”  There are a lot of good reasons to consider doing an auto refinance loan so let’s highlight a few of them.

Benefits of Auto Loan Refinancing
The most obvious benefit of refinancing your car loan is to save money on the interest you’re paying. You can also shorten the terms of your loan or reduce your monthly payments. One great benefit of refinancing is to improve your credit.  “When you refinance, it will show up as a car loan that was paid-off in full and on time on your credit report,” Dietel explains. “The new lender pays off your current loan and even though you’re taking out a new loan with the new lender, it will help your credit score.”  Remember to keep your auto refinance loan applications to a one to two-week time period so it won’t negatively affect your credit score.

Whether refinancing will lower your current car loan rate by 10% or 1%, you will still save money, Heather says. On average, consumers can save $60 a month on their car payments and get a 3.8% rate reduction, she says.  “Even if you only get your interest rate dropped 1%, you’ll still lower your monthly auto payment and save hundreds of dollars over the course of your auto loan,” she says. “With that, you can either pay off your loan faster, or invest that money in getting rid of other debt. Remember, the way to get the lowest interest rate and save the most money is to make the auto refinance loan term equal to or shorter than the old loan.”
 
Examples of how much you can save by refinancing:
 
Loan amount:           $30,000
                                 Original loan                      New loan
term:                        60 months                        60 months
interest rate:             12.5%                              7.5%
payment:                  $675                                 $601

monthly savings:  $      74
total savings:         $4,429
 
Loan amount:           $20,000
                                 Original loan                      New loan
term:                        60 months                        54 months
interest rate:             12.5%                              7.5%
payment:                  $450                                $436

monthly savings:       $14
total savings:        $3,434
6 month shorter loan
 
Overall, at whatever level your credit score is at and whatever interest rate you are currently paying on your car loan, refinancing can save you anywhere from several hundred to several thousand dollars over the life of the loan. Check online and your local credit union or bank to see what they offer and to see if you qualify to refinance.

Financial experts tell consumers to check all areas of their monthly budget to see where they can cut, like insurance, groceries, cable bills and phone bills. Your car loan payment is an expense that you can easily reduce by refinancing.

We’ve been discussing this topic with Heather Dietel, Director of Business Development at myAutoloan.com, a licensed auto loan refinancing lender.  She has indicated that if you are paying more than what you think you should, it a pretty easy task to inquire and find out if you can save money.  So where do we begin?

When and How to Refinance
Consumers can refinance their car loan after three on-time payments, Dietel explains. Three to six on-time monthly payments is usually the minimum and there’s no point at which it’s too late to refinance. The more on-time payments you have, the more chance you have to increase your credit score. But you don’t want to wait too long since you want to start paying a lower interest rate as soon as possible.

So how do consumers start the process of refinancing? Usually, the easiest way is to go online and fill out an application with a lender that does auto loan refinancing Dietel says.  “It’s so easy to do it online, it’s not worth the time to try and get your current lender to match any lower rates you’re offered,” she says. “Plus, you’ll get responses within minutes. This can help you make a good decision. It’s almost always a different lender that will refinance you. Not everyone who applies is approved though. You can get rejected by making a late car payment and not taking care of your credit.”

If you still don’t have a prime credit score, you may look like too much risk to the lender who is considering refinancing your car loan. Dietel says to try your local credit union if you were denied online.  “Generally, the new lender refinances your current auto loan for the amount left in the current term,” Dietel says. “For example, if you have 42 months left in your current term, they will refinance you at 42 months at a lower interest rate so you will pay less for the same vehicle in the same amount of time. However, your term is flexible and may be shortened or lengthened to accommodate your particular refinance needs.”

Once you apply online and get approved, a loan agreement will be mailed overnight or will be available online, Heather explains. Then you sign and return the paperwork to the lender. A check for the remaining balance of your old auto loan is sent to your current lender and the loan is paid in full to your former lien holder. Then your vehicle’s title is transferred to the new lien holder and you start making payments to your new lender.  “As with anything related to the Internet and money, you need to be careful about which sites you approach to apply for a refinancing loan,” Dietel says.

Information to have ready when applying for a refinance car loan:
• VIN number
• current mileage
• current lien holder
• current loan information – requested amount to be refinanced, monthly payment, date of first payment
• vehicle make, model and style

Our last entry is going to cover additional areas of an auto refinance loan and detail some of the benefits associated with taking the time to investigate.  See you then.

And the reason why they are so successful?  Simple.  People like to be in control.  We often call this empowerment because taking the auto loan process out of the hands of a salesman gives you trememdous control in negotiating the deal on your car.  Picking up the telephone and talking to a salesperson about an auto loan involves a lack of control.  Going to a car dealership and speaking to someone there involves a lack of control.  However, using your mouse and choosing where you want to go and how long you spend there, while you search for rates and possible auto financing, that’s control.

myAutoloan.com obviously offers a great service; you will know this because you are reading this post.   But we don’t do this for any other reason than that we love cars, love helping people to buy them and love saving people money by going direct to financing

sources.  You see, we don’t mark up any of our loan offers therefore, you are getting the most competitive rates and terms available.  And we hate those people out there who will quite happily sell you a loan deal that will, effectively, eat up your income, when at the same time there are loan deals that will clearly save you money.

Yes, we love what we do.  We love to help our customers find auto loans and auto refinance loans to save them money.  It has taken a few years for people to truly understand the power of the Web just how much freedom that is provided to obtain information that was once more difficult to get your hands on.  But now that people know how much control they have with their mouse and the internet, it pretty much dominates our lives. 

In fact, it is pretty fair to say that there has never been a better time to buy a car, and there has most definitely never been as much information available to the consumer. Check out our auto buying program, or the auto buying guide and the vast amount of customer information and research that we have compiled.  Our moto: Your Loan – Your Way!

Safety in cars has come a long way.   While there are still, believe it or not, some vehicles that have hardly any safety features (a certain Italian manufacturer springs to mind) the majority of cars have sophisticated safety equipment fitted as standard.   Even so, there are a few safety measures that you should insist upon having in your new vehicle when you buy.  If they don’t come as standard equipment, buy/add them as extras or options.  Most of the time they come in a package but they can always be purchases separately if you wish.  If you are buying a used vehicle, buy the vehicle that has added the most safety specifications and best safety record  as close to the best safety specification as possible.  This is an investment in your future, and not doing this means that you’re literally driving an unsafe vehicle making your car unsafe.

First up, and we know this sounds really silly, but especially if you are buying a used car, make sure it has seat belts.   Seat belts can mean the difference between life and death.  Safety records confirm it.   In todays world, seatbelts are law and must be used, therefore, don’t buy an auto without them.  That is that.  So always check that whatever auto you purchase, it has seatbelts and buy obviously they must be in good condition has good and they working seatbelts.  

Next make sure that the car you purchase has an anti-lock braking system fitted.  This is, for the most part,  now actually standard on most newer modern vehicles, but some have slipped through the net, so check that the vehicle has them, and don’t buy it if it doesn’t (or if it is a new car option,  make sure you purchase the system).   An ABS makes sure that you can still control the car when in a skid.   That really is all we have to say on the matter.

While we are on the subject, check to see if the ABS has something called Brake Assist.   This is a system devised by those nice people at Mercedes Benz.  The system actually makes sure that, in an emergency stop situation, the brake pedal is rammed to the floor, it subsequently reduces the problems that panic-braking brings to the situation.
 
The majority of cars (but not all) have airbags in the front.  However, there are many cars out there, especially the older ones, which do not have side-impact protection bags.  These do the same as frontal bags, but for the side.   Cars can be rammed into from the side.  So if you want to protect yourself from a ton of metal rushing at your head and body at 50 miles per hour, and the glass that will come with it, do your best to find either a used vehicle that has side impact, or a new one that can be upgraded if necessary.

Before you ever go shopping, search rates and check out auto loan financing in advance.  This helps keep your focus on the look, safety features, price and condition of the car.  Everyone knows that these machines need responsible handling.   Safety measures like those outlined above aid the responsible driver.  Be safe!